Full SpeedAhead

about the short-term economy, but should also be looking ahead,” says Margaret Simms, vice president for research at the Joint Center for Political and Economic Studies in Washington, D.C., and a member of the black enterprise Board of Economists. “Where the economy will grow next year may not be in the same areas as the past. They should take advantage of demographic trends, including the growth in the minority population, the increased engagement of women in the workforce and the aging population.”

And while we’re now experiencing a strong economy, a slowdown or recession is still possible. Simms says new firms that have never been in a downturn should assess the elasticity of the demand for their products or services, take precautions with their cash flow and avoid long-term credit or supplier commitments should they find their budgets stretched to the limit.

THE PROCUREMENT PICTURE
There has been a significant shift toward reducing the number of suppliers, and those remaining are expected to provide more than one product or service. This is particularly true of the automotive industry. Small minority suppliers must keep pace by growing larger through joint ventures and strategic alliances.

One example of a successful partnership is the establishment of Bridgewater Interiors L.L.C. as a joint venture which will supply automotive interior systems for General Motors. The joint venture-the product of Johnson Controls Inc. (JCI) and a Detroit-based minority business group-began production last summer. The firm’s chairman and CEO is Ron Hall, former president of the Michigan Minority Business Development Council. William Pickard, CEO of Regal Plastics (No. 43 on the be industrial/service 100 list) serves on the board. JCI, is a $13 billion majority-owned auto interiors firm.

“The contract was originally awarded to JCI from General Motors with the caveat that they form a joint venture with a minority-owned entity and locate the firm in Detroit’s Empowerment Zone,” says Hall. “For those who have aspirations of growing and heading up a large company or becoming a Tier 1 supplier, I don’t think you’ll get there unless you form strategic alliances, especially with a majority company.”

However, Hall and other experts agree that partnerships are risky and can cost you-your money or your business-if you choose the wrong mate. You must retain business and management control, particularly if you’re partnering with a majority firm, to ensure that you don’t absorb a disproportionate share of risks. If you fail to deliver goods or services as specified in your contractual agreement, you could be penalized, so make sure that safeguards which clearly define what is expected of each partner are spelled out in your contract.

Black suppliers who contract with the federal government are by now familiar with the SBA’s SDB (small, disadvantaged business) program, whereby businesses that have been determined to be socially, economically disadvantaged are no longer self-certified. Firms must now be officially certified by the SBA or a designated private certifier to qualify for procurement opportunities in private and government markets. The new system is expected to reduce costs, prevent fraud and